Impact Forecasting, the catastrophe modelling arm of reinsurance broker Aon Benfield, has said that it expects the insured loss toll from January’s severe spells of winter weather in the U.S. will be over $1.6 billion.
A series of severe winter storms struck the U.S. during January, bringing freezing temperatures, heavy snowfall and ice storms during January 2014. The winter weather, largely attributed to the position of the jet stream creating ‘polar vortex’ conditions, pulling freezing air down from the north, is set to bring a significant loss to insurers at the start of the year.
As Artemis wrote earlier this week, as these U.S. winter storm losses build there is the potential for some exposure in the catastrophe bond market, with a number of outstanding cat bonds exposed to this peril and which accumulate losses on an aggregate basis the most likely impacted.
Aon Benfield counted four spells of this severe winter weather, with the most severe being the one experienced in the second week of January.
Impact Forecasting said; “At least 21 people were killed. More than 20 inches (51 centimeters) of snow fell in the Great Lakes and Ohio Valley, while freezing rain coated the Northeast and Mid-Atlantic. The coldest temperatures in two decades then descended into the central and eastern U.S., with at least 20 states recording wind chill values minimally at -30˚F (-34˚C). Widespread property damage and severe travel delays occurred as a result of the cold and snow.”
The estimate of economic losses from this one period of winter weather is $3 billion, while the insured losses from the winter storm will be over $1.4 billion, said the broker.
The three other periods of severe winter weather are between them expected to result in over $500m of economic losses and insured losses are around $200m. Losses from business interruption were worsened by severe delays to transport systems and closures to commerce and business.
Steve Bowen, Senior Scientist and Meteorologist at Impact Forecasting, commented; “The current winter season in the United States has already become the costliest year for the winter weather peril since 2011. With higher-than-average snow totals, ice, and some of the coldest temperatures in nearly two decades affecting much of the country during January, the combination of physical damages and business interruption costs have quickly aggregated into direct economic losses well into the billions of dollars. The elevated losses this year are a reminder to insurers that the risks associated with the winter weather peril remain significant.”
The final insured loss tally from January’s winter storms is likely to rise, as claims continue to be filed and insurers report impacts. Add in losses incurred during severe winter weather in February as well and the insurance industry could see total losses of well over $2 billion from this winter weather without even taking into account Canada.